“Science and Technology Innovation Board Daily”, August 19 (Reporter Zheng Bingxun) Cardiac Healthcare (688016.SH) received an inquiry letter from the National Health Insurance Administration today due to suspected inflated prices of its product “Castor Thoracic Aortic Stent and Delivery System” (hereinafter referred to as “Castor Stent”).

According to the inquiry letter, the National Health Insurance Administration found that the factory price of the Castor stent (200mm length) was about 0.05 million yuan, and the price of supplying medical institutions through agents exceeded 0.12 million yuan. After initial interviews with the National Health Insurance Administration, Cardiac Medical proposed a price adjustment plan, but it did not change the fact that the price difference significantly exceeded the necessary range.

Therefore, the National Health Insurance Administration requested that Cardiac Medical further publicly respond, such as the factory price, terminal price, and R&D investment costs of Castor stents, as well as sales and actual profits over the past 5 years, and also requested that during the Castor stent sales process, Cardiac Medical positively respond to questions such as whether agents raised online prices and carried out improper marketing practices through agents, thereby increasing the burden on patients and health insurance funds.

In response to this incident, the “Science and Technology Innovation Board Daily” reporter inquired about the impact of the incident on the company. The other party claimed that “meetings within the company are in progress” and declined to disclose further information. An industry researcher told the “Science and Technology Innovation Board Daily” reporter that in fact, companies can generally only be required to disclose confidential trade data if required by the court.

According to data, Castor's stent is the world's first branched aortic stent independently developed by Cardiac Medicine to treat aortic arch disease, and is one of the key products in the core product “aortic stent products” of cardiac care, and has won the 2021 national single championship product.

Taking 2023 as an example, benefiting from products such as Castor stents, Cardiac Medical achieved annual revenue of 1.187 billion yuan, an increase of 32.43% over the previous year, and net profit of 0.492 billion yuan to mother, an increase of 37.98% over the previous year. Among them, aortic stent products achieved revenue of 0.94 billion yuan, accounting for 79.16% of overall revenue and a gross profit margin of 77.37%, which is the highest of all products.

By the end of March 2024, Cardiac Medical Castor Stents had covered more than 1,000 terminal hospitals in China, which is higher than the coverage of other products. Overseas, cardiovascular medical sales cover more than 30 countries. Among them, Castor stents have entered 16 countries, and the first cases of implantation have been achieved in Singapore and many European countries.

Also driven by sales of Castor stents, Cardiac Medical expects to achieve revenue of 0.777 billion yuan to 0.808 billion yuan in the first half of 2024, an increase of 25%-30% over the previous year, and is expected to achieve net profit of 0.391 billion yuan to 0.419 billion yuan, an increase of 40%-50% over the previous year.

It should be pointed out that although aortic stent products continue to grow, the growth rate has been declining year by year. In 2023, the year-on-year growth rate of sales of this type of product was 28.07%, down about 16 percentage points from 44.04% in 2021.

Regarding whether the inquiry to Castor will have an impact on the next performance of Cardiac Healthcare, the industry researcher mentioned above told the “Science and Technology Innovation Board Daily” reporter that in the short term, it will also depend on how the company responds and whether it can make a reasonable explanation.

In fact, in order to cope with competitive pressure in the domestic market, including the pressure brought about by collection in advance, Heart Care is speeding up the deployment of overseas markets. Among them, Cardiac Healthcare spent 65 million dollars to acquire Optimum Medical Device as a wholly-owned subsidiary at the end of June this year, hoping to use this to further penetrate the company's products into the European market.

In 2021-2023, Cardiac Healthcare's overseas business revenue was 30.1423 million yuan, 52.7198 million yuan, and 82.345 million yuan respectively, accounting for 4.40%, 5.88%, and 6.94% of the overall revenue, respectively. The revenue and share are increasing year by year.